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Defective Contracts 2 - Drunkenness, force and fear, facility +…

- - - - defects of capacity can be inherent e.g. age, mental capacity (defective contracts lec 1) or can be self induced = intoxication
- - - - "it is impossible to say he was in a state of incapacity from drink. he was in such a condition from drink that tho' had not all his wits about him; and if that were a sufficient ground for annulling a bargain, i fear we would have plenty of reductions" lord justice clerk
      - "He must prove that through drink he had not the use of his reason before we can say he has made out his defence" - lord justice clerk
      - "it is evident that drunkenness, when it goes so far as absolutely to destroy the reason, renders a person in this state, so long as it continues, incapable of contracting since it renders him incapable of consent. - Evans Pothier, vol i.,p.29
      - "the question, therefore, is, was the pursuer so drunk as to have been deprived of understanding, and to have been incapable of consent? that is the issue."
- - - - Stair Institutions I,9,8 "such deeds and obligations as are by force and fear, are made utterly void"
      - focus is on overcoming the will of the granter
      - "the act of force is truly...only one means of inducing fear, the true ground of reduction being extortion, through the influence of fear, induced in various ways." Priestnell v Hutcheson 1857 19 D 495, 499 per Lord Deas
      - there are 2 criteria for force and fear
        
        threat of force
        
        threatened action must be illegal
    - - facts = “The Earl having caused send this Vinfra to him to his castle in Zetland (Shetland) presented to him this contract subscribed by the Earl, and commanded him to subscribe it,which the said Andrew Vinfra refused, wherewith the said Earl was so offended, that with terrible countenance and words, and laying his hand upon his whinger, he threated with execrable oaths to bereave Vinfra of his life, and stick him presently through the head with his whinger if he subscribed not, and so for just fear he being compelled to subscribe it, the same was null”
        
        held = the exception of fear was very relevent
    - - facts = two sisters who had carried on various businesses left to them by their father were in serious financial difficulties. the sisters agreed for Bradford to auction off the property in question. Day before auction Bradford threatened to call off auction unless they were paid more. sisters agreed to and got a lot less money
      - issue = sister claimed to have agreed to new terms only under threat that if they did not do so the sale would be cancelled, and they would be liable for all expenses incurred as a result of the cancellation and this threat was an instance of force and fear.
      - held = threat to cancel auction was lawful, contract valid, the pleas of force and fear failed because there was no force involved even if there was fear.
        
        "in the law of Scotland the mere existence of fear is not enough. It must be fear induced by force or threats of force which would affect the mind of a reasonable person"
  - - - English law focused on the use of illegitimate pressure rather than only overcoming the will.
      - physical duress = threats to harm a persons or their property makes a contract voidable.
        
        person = Barton v Armstrong [1976] 1AC 104
        
        property = Skeate v Beale (1841) 11Ad & El983
      - economic duress: threats to breach contract
        
        Atlas Express v Kafco (1989)
        
        court decided that because there was a threat made to a small business for them to breach the rules of a contract it had entered into, this would be considered economic duress.
        
        facts = The Kafco imported basket ware and entered a contract with Atlas to sell and deliver baskets to Atlas retail stores. Atlas tried to negotiate a further term in the contract for a minimum order of £440 per trailer load. Several days later, an Atlas representative turned up to Kafco’s premises with an empty trailer and told Kafco that if the trailer was not returned with £440 worth of goods as the new minimum, the trailer would be driven away unloaded. Kafco reasonably believed they would be unable to negotiate further terms of the contract and thereby sabotaging their opportunity to trade with Atlas, so they felt compelled to sign the agreement and meet the new terms of minimum stock trade. The agreement continued until Kafco sent them money on account and a letter stating they had signed the contract under duress. Atlas sued for the money on account.
        
        issues = whether Kafco signed in duress, even though they honored the contract
        
        held = Kafco found to have signed the agreement under economic duress as they felt that in the circumstances they had no alternative
    - - facts = Mrs Welch lived with Mr Cheeseman + he was violent, in fear of violence from C she transferred her interest (worth 3k) to him for only £300.
        
        held = contract was voidable on grounds of duress and Mrs Welch was able to reduce the contract
- - - - A claimed that his gift was due to fraud and circumvention while he was in a condition of weakness and facility + had undue influence from members of the group. at the time he was seriously ill and depressed + suffered from a manic depressive illness since 1981 = weak of mind emotionally vulnerable, scared and upset + noticeably confused. he was often in a trance like condition + being treated from time to time with drugs prescribed for hypomania and depression.
      - Sep - 1st October 1985 A and his wife received many visits from the officials and representatives of the fellowship. they engaged in religious practices purported to "heal the pursuer, preached to him that money was valueless and exhorted him to renounce all of his possessions. It is suggested that they repeatedly pressured him into believing that only by giving up his worldly possessions to the fellowship could he achieve salvation. + they pressured him into believing that he wanted to give up all his worldly possessions to the fellowship.
        
        it is said that he came under the dominant influence of James Addison + his wide and William Myron Patterson and his wife + he lacked free will, he was weak and vulnerable.
    - - there were many averments from which the court might infer weakness and facility in the pursuer at all material times.
      - the averments of repeated pressure in relation to financial matters coupled with religious observations and exhortation, all at a time when the pursuer was in fact owed money by the defenders were sufficient to warrant an inference of circumvention of supporting a case of undue influence.
      - in any event the averments were habile to support a case of fraud and circumvention, which did not necessarily require deceit.
  - - - makes contract voidable
      - has to be an pre existing relationship of trust
      - "if the relationship between parties is such as to beget mutual trust and confidence, each owes the other a duty which has no place between strangers. the party trusted and confided in his bound by the most obvious principles of fair dealing and honesty, not to abuse the power thus put in his hands" Gray v Binny 1879
      - requirements
        
        pre existing relationship of trust
        
        party with the influence/trust must have benefited by a transfer that was under value or a gift from the party under the influence, so objectively there must be a financial loss.
        
        The disadvantaged party received no independent legal advice before make the contract or gift.
      - Gray v Binny 1879 7 R 332
        
        facts = G a wealthy 24 year old gentleman inexperienced in the way of business or law, having inherited a large estate was persuaded by his mother to sell his estate for a fraction of its true value to Binny the family solicitor who was an intimate friend and the law advisor of Mrs gray. being mixed up with her affairs, he was her creditor in a debt of £8k so his mother owed money to Binny who was her intimate friend = conflict of interest.
        
        held = contract could be reduced on the grounds of undue influence